Nat’l Ass’n of Manufacturers v. SEC

D.C. Circuit finds that SEC rule requiring manufacturers to disclose when minerals in their products were not found to be “DRC conflict-free” violates manufacturers’ First Amendment rights.

The Issue: Responding to concerns that civil war in the Democratic Republic of Congo (DRC) is financed substantially by trade in locally mined minerals, in 2012, pursuant to the Dodd-Frank Act, the SEC implemented the “Conflict Minerals Regulation,” which requires companies whose products contain certain minerals to conduct due diligence to determine whether those minerals originated in the DRC or bordering countries, and to disclose their findings in reports to the SEC and on their websites. If companies could not determine the source of the minerals, they were required to state that the products in question “have not been found to be ‘DRC conflict free.’”

Organizations representing business interests challenged the rule as violating the First Amendment rights of manufacturers by “compelling” their speech. The crucial legal issue on appeal was whether the regulation should be reviewed under a relatively lenient standard applied to compelled factual disclosures in commercial speech or under one of several stricter standards applied to other types of speech regulations. A panel of the D.C. Circuit overturned the trial court decision upholding the law, after holding (contrary to other Courts of Appeals) that the more lenient standard applies only when the purpose of the disclosure requirement is preventing consumer deception. After the full D.C. Circuit sitting en banc rejected this interpretation in another case, in which Public Good also represented public health amici, the panel, in a 2-1 decision, found three new—unprecedented—grounds for striking down the SEC rule: (1) the more lenient standard applied only to disclosures in product advertisements and on product labels; (2) the more lenient standard did not apply to any issue around which there is public controversy; and (3) even if the more lenient standard applied, the state would need to supply substantial evidence that the regulation was effective in achieving its goals.

Why It Matters: Civil war has ravaged the Democratic Republic of Congo (DRC) for decades, causing millions of deaths (mostly of civilians), widespread violations of human rights, famine, disease, and displacement. The fighting is financed in large part by trade in what are referred to as “conflict minerals,” minerals that are mined in the region and used in various technologies worldwide. Giving consumers a choice whether to buy products involved in financing the war or to seek equivalent uninvolved products is a non-coercive measure that could make it more difficult for the perpetrators of human rights violations to continue the bloodshed.

But the case is also doctrinally important. The public health groups represented by Public Good advocate for effective health warnings on foods, medicines, tobacco, alcohol and other consumer products as an essential means of warning the public about health hazards. Subjecting such health warnings, and other disclosures of information, to heightened First Amendment review threatens to undermine the most efficient way of making available all sorts of critical public health and safety information, as well as preventing consumer confusion and allowing consumers to make more informed decisions. The precedential implications of the case are especially important, because the D.C. Circuit is the Court of Appeals that reviews most challenges to federal regulation.

Contribution of Public Good: Public Good filed a brief in support of en banc review on behalf of anti-smoking and other public health groups. Public Good explained that the three grounds for the panel’s decision conflicted not only with D.C. Circuit and Supreme Court precedent, but also with the holdings of other federal Courts of Appeals. The brief also pointed to many examples of common sense protections of public safety and informed decision making that would be placed at risk by the heightened standard of review adopted in this case.

Amici represented by Public Good: Public Good’s brief was filed on behalf of the Tobacco Control Legal Consortium, the American Cancer Society Cancer Action Network, Campaign for Tobacco-Free Kids, the National Association of County and City Health Officials, the Public Health Law Center, and Truth Initiative.

Outcome: The D.C. Circuit, which generally disfavors amicus briefs at the rehearing stage, granted Public Good’s request to file the brief, but denied rehearing en banc, leaving this dangerous precedent in place. In early 2017 the SEC and the Trump administration signaled their intent to suspend the remainder of the conflict minerals rule.